Waguih Elie George Siag and Clorinda Vecchi v. Arab Republic of Egypt: A Question of Nationality?

On 1 June 2009 an ICSID tribunal found the Arab Republic of Egypt liable to Mr. Waguih Elie George Siag and Mrs. Clorinda Vecchi for damages totaling more than US$74 million plus interest after finding that Egypt violated numerous provisions of the Italy-Egypt bilateral investment treaty.

The claimants in this case, both natural citizens of Italy, were the principal investors in two Egyptian corporations, Touristic Investments and Hotels Management Company (SIAG) S.A.E. and Siag Taba Company. In 1989, the Egyptian Ministry of Tourism sold a large parcel of oceanfront land on the Red Sea’s Gulf of Aqaba to SIAG for the purpose of developing a tourist resort. SIAG subsequently transferred a portion of the property to Siag Taba Company.

The claimants alleged that, commencing in 1995, Egypt unlawfully expropriated their investment, consisting of the property and the resort which was under development.

In addition, the claimants asserted that Egypt contravened a number of its obligations under the Italy-Egypt BIT by: (i) failing to protect their investment; (ii) failing to provide the claimants and their investment fair and equitable treatment; (iii) subjecting the claimants and their investment to unreasonable and discriminatory measures; and (iv) failing to apply the most favoured nation principle.

In response, Egypt advanced a number of defenses, particularly but not exclusively in relation to Mr. Siag. Specifically, Egypt contended that Mr. Siag was at all relevant times a national of Egypt and was thereby precluded from succeeding in a claim against Egypt under the Italy-Egypt BIT. Even though the majority of the tribunal rejected those arguments in its April 2007 Decision on Jurisdiction, Egypt reformulated this contention and forcefully pursued it before the tribunal. In so doing, Egypt made two arguments in support of its continued objection to the jurisdiction of the tribunal.

First, Egypt claimed that it had recently discovered that Mr. Siag had been declared bankrupt on 16 January 1999, with retroactive effect from 20 August 1994. As a result, Egypt contended that Mr. Siag (from the date he become bankrupt in 1999) lacked the capacity to arbitrate the dispute.

Second, Egypt reasserted its earlier claim that Mr. Siag was an Egyptian national and accordingly failed the negative nationality requirement of Article 25(2)(a) of the ICSID Convention. In support of that latter argument, Egypt contended that Mr. Siag had fraudulently obtained Lebanese nationality, and, therefore, never properly shed his Egyptian nationality under Egyptian law.

In both instances, the majority of the tribunal held that Egypt’s objections to the tribunal’s jurisdiction were out of time under ICSID Rule 41 and should be disregarded pursuant to ICSID Rule 26. Rule 41 requires that jurisdictional objections be made as early as possible. The majority of the tribunal also found that in waiting too long to raise arguments regarding Mr. Siag’s bankruptcy and alleged lack of Lebanese nationality, Egypt had waived its right to object on both grounds pursuant to Rule 27.

Having confirmed its jurisdiction, the majority of the tribunal went on to consider the merits of the case. In so doing, it found that:

“…the evidence clearly establishes that Egypt [had] unlawfully expropriated Claimants’ investment, in breach of Article 5(1)(ii) of the BIT; that Egypt failed to provide full protection to Claimants’ investment, in breach of Article 4(1) of the BIT; that Egypt failed to ensure the fair and equitable treatment of Claimants’ investment, in breach of Article 2(2) of the BIT; and that Egypt allowed Claimants’ investment to be subjected to unreasonable measures, in breach of Article 2(2) of the BIT.”

Further, the majority of the tribunal dismissed Egypt’s defenses to liability. In particular, Egypt argued that the claimants were estopped from denying their Egyptian nationalities, which both had relied on numerous occasions in the past in order to acquire and use Egyptian passports and to conclude business deals. The claimants did not contest those submissions, but denied that their behavior provided grounds for estoppel. The majority of the tribunal held that:

“…the Claimants acted in good faith in obtaining their Egyptian passports and in their subsequent business and other dealings with Egypt. As to the latter, Claimants did not know at that point, nor as lay persons could they reasonably be expected to have known, that in law they had lost their Egyptian nationality. Thus the Claimants are not estopped from now denying their Egyptian nationality.”

In a dissenting opinion primarily on the issue of estoppel, Professor Francisco Orrego Vicuña disagreed and found that Mr. Siag’s evidence of Lebanese nationality—a certificate of registration issued by the Lebanese authorities—was apparently originally obtained for money to avoid Egyptian military service and was inconsistent with the Lebanese Ministry of the Interior’s records, which did not have any registration of Mr. Saig’s Lebanese nationality. Accordingly, Professor Vicuña would have applied the doctrine of “clean hands” and found that the claimants’ were estopped from disavowing their Egyptian nationality.